DKS - Earnings call transcript Q1 2022 | DICK'S Sporting Goods, Inc.

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Operator

Hello, everyone, and welcome to the First Quarter 2022 DICK'S Sports Goods, Inc. Earning Conference Call. My name is Victoria, and I will be coordinating your call today. [Operator Instructions] I'll now pass you over to your host, Nate Gilch, Senior Director of Investor Relations, to begin. Please go ahead.

Nate Gilch

thank XXXX joining results. and our to everyone, quarter first morning, you us for discuss Good our On our Executive Gupta, President call and Financial today’s will Chief Officer; be and Lauren Hobart, Chief Officer. Navdeep website call today’s XX archived Investor for of playback located will investors.dicks.com A at in be our Relations months. approximately

these be making such we filings materially release the Report in risk earnings cautionary call. our are actual update the factor considered forward-looking to statements, differ and subject statements that to XX-K of no statements As Form a including discussions forward-looking statements Annual uncertainties statements cause in last reminder, various these or assume our could during this to Any statements. We from with should information. will our be cautionary our with made and which SEC, obligation risks and conjunction on any results in

the GAAP expense share notes. As of QX adopted the new our notes issued interest excludes in rules, XXXX, assumes underlying shares total share includes period, diluted in which quarter required the accounting of convertible per senior after-tax current first and our by these settlement earnings

will which debt intent dilutive bond expect share. and portion in effect principal transaction, Given at the in earnings aligns reflected closely to more as settle the reflecting we have with by economics believe notes notes hedged the delivered settlement. per of the is Accordingly, our the notes underlying shares of these that diluted non-GAAP to our settlements, the we not that be our cash do a

results please And for to Lauren. August will purposes, are XX, the measures With non-GAAP I now a find Investor your future earnings turn reconciliation second Relations referenced XXXX. over on planning website. For any finally, additional details to call our or tentatively our on XXXX call, to today's to on quarter that, financial scheduling publish we refer this of

Lauren Hobart

everyone. Nate, and morning, good you, Thank

continued our a to our with environment. execute quarter move with results dynamic first and team well in as agility highly are We pleased

build for on reflecting assessing and be outlook experience, levels, core strategies advantages macroeconomic to morning. at environment is every uncertain important meaningfully our Before well-positioned and exceed ahead. been the our diving our year. have while we based our that ability keeping lead across this and running into the want manage take carefully economic context, our heart the we market a years over With athletes our are, the believe in evolving our results Like we of moment rapidly we of cautious continued demonstrated will I quickly we clear, DICK'S our it's therefore, to XXXX challenges our the two else, the conditions, that adjustments decision through to the we cycles. expectations our competitive lowering it's five and adapt are other to on expect the in past our to we everyone have the execute confident ability and outlook our clear are the adeptly I appropriate years. to made monitoring our over and recognize think we business to With be this changes to macroeconomic we've and pandemic the leader, past extend strength business in and through address quarter, XXXX to made To performance perspective, the make. do the continue of years,

business flexibility nimble. macro to in We landscape and remain our continue closely the to have watch the

getting our Now, to results. back

of year. included which certain sales period This the we first sales in the XXX% anniversary earlier billion categories. decline payments, of in normalization significant a store As as same we sales the this X.X%, delivered of well comp the as increase This stimulus anticipated announced morning, in a prior of $X.X followed sales in also quarter. reflected comparable

sales two to that sequentially pre-COVID the accelerated XXXX levels, shift above in an is top from versus conviction and over behavior participation lasting outdoor up last reinforce made in QX past XX% run Consumers line indeed on structural. substantially greater results strong continued the focus and changes, lifestyle increased sports our and Importantly, have quarter. These activities. years consumer fitness and health with

have center Our trends business have secular actions past transform is squarely over business. our these significant of years advantages taken of the our across competitive we all the company at and given to us five aspects the

strong strategies, differentiated increasingly margin promotional Our assortment, to growth. and drive merchandise sophisticated more continues combined product disciplined with our

merchandise During we basis by margin points XXX rate our expanded the quarter, versus XXXX.

therefore, me this what susceptible transformation. very and to as it product we promotion. five point is is the let The today that ago. content continuing, appreciated different underscore not our than you'll Its of products carry carried not the whole, heat we from a distributed and more always that market in is years critical as higher the narrowly Before about find

the surgically they addition, In adjust than are several ago. significantly sophisticated have more we to pricing tools years today were

are quarter we've drive existing EBT of past and over of that two in XX% is sustainable. share years levels, XXXX fundamental our merchandise both non-GAAP over of margin Led by driven margin core compared entered pre-COVID to margin these pre-COVID any our significantly enhancing of and business our we sales the history. achieved focused position of profitable strategy we're growth. rate structurally first merchandise the a With to further and We our confident majority on we and our strengthen very changes, tremendous double-digit per in higher expansion long-term $X.XX, earnings ahead diluted strength that

as on hub. centered best-in-class a which our stores omnichannel platform, our features is approach Our

store, of quarter, and serving over providing distribution stores in-store During XXX from points pickup our the ship through omnichannel in-store athletes or total of both first sales, our curbside. XX% enabled over fulfillment forward for

loyalty. invest to service engaging reinforce an serve continue and and model into highly better experiences also enhanced athletes lean We in to our their

do. positive science. focused on our and everything omnichannel strong culture, investments This technology our back-to-back annual and the success we and a to our putting we at spend our of energy communities Furthermore, are were visiting work to remain time to and remain Work. I prioritize by certification impact, have to stores of and Great Place capabilities continues Our core fantastic. teammates, distribution athletes and a center the from the we continuing as recently positive lot community I maintaining sense digital data is of in we centers awarded meet teams

Our advantages retain strong team are and key competitive ability and for to dedicated attract talent us. our

merchandising, within with stronger than our brands remain relationships Next, key ever.

categories brands in wide with providing Our assortment trend sports. the athletes our enhanced styles range the to from is top of and are hottest we access across on a

ensuring of Importantly, at are all we products address that that we have prices also the athletes. needs

a our example, tremendous DSG, across For and through youth. fashion-forward products value high-quality, brand, offer we at men's, women's largest vertical

key and including to Our brands. grow continue brands, these we invest VRST vertical and are CALIA also lifestyle and in athletes strongly resonating our with

long-term DICK'S including of engagement elevated active earnings great strategies Galaxy and grow expectations look In chains. and of to lead of Today, concepts, DICK'S to Galaxy and Sports and and help to active store confident Performance of these new all and We are outside House in House are Center, Going, learnings our open promising our in Minnetonka, into and to really Lastly, our our power a early and and has refine House we Golf deliver ability key closing, third excited results. the Public concepts, our in Lands has an we get Gone! together our sales a and are healthy of Sport, than example community the while continuing forward delivering ever lifestyle position we in merchandise unique pulling Going, now presentations. Sport core Golf powerful marketplace. and growth. has families been Minnesota. service, important lives. remain and Sport more exceeded times DICK'S as

athletes excitement united Our to equipping our these teammates dreams, to create personally during uncertainty. and especially confidence which times purpose, achieve of are their is by behind all common

I want over now and and turn financial our call thank concluding, of for dedication outlook to to review business. in unwavering hard the Navdeep Before results all to detail. I'll more their work our teammates to our

Navdeep Gupta

morning, and good Lauren, you, Thank everyone.

our in review sales decreased the to X.X%, same results. brief decreased a year. Consolidated last quarter period with begin $X.X approximately first comp store Let's sales in following increase of XXX% billion. Comparable X.X% sales a

comps surge declined throughout that in payments from saw we the as And And we were certain impacted pandemic. X%. stimulus by in declined prior addition, year indicated, part quarter. average categories anniversary anniversary, normalization the and Lauren of transactions significant the year-over-year As ticket as by anticipated sales this X.X%

consolidated points XX above in levels. million offset was quarter. pre-COVID continued increase the sales to fixed accelerated year. XXXX, supply or sales increased costs deleverage sequentially declined costs run This Compared from decrease. most and occupancy recent Importantly, from was decline XX XX% items continue $XXX.X versus of net by These margin first quarter XXX the basis last in Gross by and sales profit of the significantly and partially XX.XX% our driven were points basis basis expansion. sales rate a on chain-related merchandise points to

continue and margin pricing. we assortment, For the disciplined strategies our the as benefits product quarter, differentiated basis our combined to clearer see XXX points from merchandise increased promotional and increasingly more with sophisticated

mix. sales. XX.XX% incentive advertising compared driven lower SG&A with expense points and is our items $XX primarily compensation dollars sales due These investment in associated compensation which income our plan, in million is last partially million The also sales to line. offset the expense other by in investment decrease of We deferred and investment and recognized expenses increase by offset or were $XXX.X the in changes loss hourly basis wage favorable in deleveraged to the SG&A of values XXX of rates. saw were fully year, expense net by

of structurally $XX pre-COVID prior SG&A share compared last Driven year million EBT the of In addition, per non-GAAP earnings In was higher levels, included a compares $XXX.X margin net This quarter. of XX.XX% non-GAAP in delivered safety we and sales approximately per to million $X.XX diluted XXXX. COVID-related $X.XX. in share diluted and or sales. by year $X.XX earnings of costs to total, our also merchandise

no ended billion $X.X Now credit facility. equivalent billion balance with QX sheet, cash unsecured looking on approximately $X.XX our our of cash and to we and borrowings

inventory increased levels as quarter XX% with of Our product to flow progressed. improving year, compared QX last quarter end the

Looking ahead, and of continue about a navigating prepared levels to environment rest supply inventory we chain year. QX overall global the good are feel through the for dynamic our

capital net $XX.X paid $XX.X first expenditures our in allocation, to capital million quarter million we and quarterly were dividends. Turning

we at stock. of notes convertible the and unwound common warrants of During million the exchanged outstanding million note hedge convertible of senior and $XXX corresponding cash shares approximately XX% X.X our our principle the of for quarter, for

we principal amount this $XXX approximately exchange, have in outstanding. Following million aggregate

million of price of $XXX.XX. stock XXX,XXX We at an average $XX also repurchased shares for our

Now outlook let for me XXXX. wrap our up with

continue of growth the pleased start with meaningful year XXXX We levels. our are above and to see

and for there macroeconomic takes environment many However, environment appropriately as Lauren an global With economic prudent puts play. been and increasingly carefully and our adopt are backdrop, it the XXXX uncertain an is we cautious we mentioned, outlook supply have chain, Thus, geopolitical to are year. we adjusting range. dynamic the monitoring at believe guidance a

well of we with anticipated $X.XX range For $X.XX store landscape and additional rates, year. per negative than balance higher approximately diluted expected now originally the the over at range $X.XX earnings to to expect includes in in as the the promotional be of EBT EBT normalization to the of share the expected of $XX.XX year, is supply X% range negative midpoint. billion as chain-related billion, in in to costs risk margins non-GAAP XX% and of sales be This to X%. the comparable wage greater

pre-tax with As long-term our expense debt. includes a $X.X also of $XX interest this billion million approximately reminder, associated

rate earnings shares on Our guidance outstanding. based diluted is approximately and tax an and XX% between an assumes XX effective million average XX%,

includes minimum repurchases, In addition, guidance. now of is our included share of effect a million our the in plan of which EPS $XXX

today our company leader, year, Importantly, recognize uncertain at business pleased the we an capital is $XXX doubling a And structurally of XXXX expect updated in clear we outlook, pre-COVID. to million. compared for net to and million margin increase EBT with the term in while $XXX and more to stronger long are and In to continuing DICK'S EBT we closing, expenditure our invest market are XX%, we And of results remain environment, we XX% the versus the for our midpoint are our approximately rate. XXXX of economic we quarter. profitable of and expect sales first approximately

Operator, remain interest you financial for confident with QX the your may Thank approximately questions. cash growth Goods. strategy cash Sporting and drive $X.XX we This sales long equivalents, prepared of billion for Our and over is DICK'S in position our ending profitability now the ability you to concludes and strong, line and our in term. comments. our open

Operator

Thank you.

Instructions] Simeon comes We ahead. go first our at [Operator question our Stanley. from will start Please, Gutman Morgan now session. And Q&A

open. is Your line

Simeon Gutman

Hey. to revision. like Good morning, the on everyone. follow I would up

and you're the you think you the you what's talk guidance? about it's the you seeing environment? as inventory margin, with can first Navdeep, about a I speak? a Sales, us seeing like Can XX% Are amount cut to mentioned What's about Are midpoint, carrying you balance? a the It we few gross current into changing talk my your going looks already promotion? question. in So that elevated line year. that's in factors. good

Lauren Hobart

Thanks, Simeon. It's Lauren.

very questions, out parse and try important and all I'll are of those them. them and think all all I answer

the costs costs our fantastic, QX. had you a with And know, increases accurate in for as that that two our approach to we of changed our cost are our as our into driving labor product quarter were quarter. rest in of in those expenses. and had, the good our guidance we have have a There's anticipated We forecasting went we pleased very the We're and and things the QX. freight

First is through an consumer right now. is the awful going lot that

very, and inflation those pressure all are that freight, we of perhaps the we and this putting very the items, same know. labor expenses three-line And on then that grocery is anticipated. than consumer So, costs gas there's trends are accelerating we so the see store, macroeconomic environment pump quickly obviously, input had challenging. more product At at geopolitical is in the time, challenging,

to cautious the we want forward as look appropriately be so to year. we And

different and want be to QX that any pleased very and we what that I saw we healthy not in actually at very are plus our are it. seeing is meaningful are clear from very believe trends we However, we with inventory XX%

in. and some outdoor when could In as more, been of fact, inventory And equipment we we certain in would categories There's this terms normalize that there where flowing had normalized would if have they are have fitness But anticipated areas more. expected. have we year. disruption is we like

inventory products We is our healthy. chasing still are in and categories certain

We any not we significant promotional environment, your our the seeing are environment. a change other To promotional not anticipating question, are -- in answer the markdown risk.

any changes and monitor as some way. meaningful continue obviously marketplace absorb will surgically increases. we not that in We be we to dramatically of will But cost the price the has addressing shifted

control as cautious outside the are are of of toward at just We when the look that look we a appropriately year. rest lot being we things of our

Simeon Gutman

think for Thanks for is and The confidence the that that follow-up level, industry your Okay. we're can is talking the that. holding a is categories mentioned, growing much water at or structurally that this there been we've midpoint, the you even XX%, higher or level, XX%, years. at to which because But further, in question business consumption the said. at higher any I Navdeep point won't about two you revert as

we that us showing see are reversion? categories which won't level that So of

Lauren Hobart

Yes. you're absolutely board, right. Across the

the believe as are golf. golf. we've three we our normalize in fitness, rebaseline normalize our we They has every the all at years include talking long-term more. and look about to higher look fact And has pre-pandemic the pandemic-surging And The they and potential. single consumer, reflects at for that we virtually and meaningfully everyone business that them bikes equipment, except expected that they -- like playing running, is categories walking, have two but are which Hunt, consumer outdoors paddles things outdoor they than those last If growth to normalize, are you volume. the will been and are category expected all

actually outside. business. need the people They types need and with families, these think outlook They on we of active. we their to well aspect be of these want to in serve get needs So of our are to our positioned be We are times, any changing not athletes. to

Simeon Gutman

and good Lauren Thanks, Okay. luck.

Operator

Thank question. much your you so for

question please next Yih ahead? comes Our Barclays. from at you Could Adrienne go

Adrienne Yih

their better well topic partnership because the we thereby it, you That's Yes. Great. Thanks. really to a product I for just question. partner, guess that, causing competing my Lauren, the their lack where question did is, with promo offer say Thank promos Nike, of you my sort heat see call as notion you're very to this not quarter. on highest of as stay well, much. Is I elevating the entire premier that brands best let's actually so and platform? brand other and a product first term. want

Lauren Hobart

Adrienne. Hi Yes.

result, strategic experience, So have who our so showcase partners, just an our brand stores time all brands but product with that of I is certain our and partnership our a Nike in our think to partners. with the a that's their that sport, all-time in is moment invested at situational much with their are in high, in such partnership actually we our and of as not fact rooted And want stores. in

we So, pristine that's higher high our of big results. been a yes, and more to getting across part in that board, access And are the driving heat and has consumer our premier strategy, that's demand. product

Adrienne Yih

a the then Inventory couple And of was for of quick the XX%. ones. Navdeep, end Great. at up quarter

with comfortable that get trying I'm like is units, cost increase? AUC effectively, what so portion is of of And to yes. in that. You're portion transit? to So What inflation that

Navdeep Gupta

our I into the about think look also the inventory to before we is Yes, was were going details, of ways XXXX. to Adrienne, the inventory what at think through position one happening I to as maybe go

we year, called we you look last went our at the If as into continued year. build position inventory as out it, to

levels our year Difficulty] QX QX comparing inventory in-stock So, especially in what [Technical last year, versus you're starts last and

Operator

you thank Hello, everybody, standing and by. for

speakers. with like would go to if We have reconnected you Adrienne, the ahead.

Adrienne Yih

on discussion last the I were middle inventory? think year's your you of Navdeep in

Navdeep Gupta

Yeah.

back Sorry, I'll again. start

and I we seem be to happened lost the don't here. here connection. end – the what were So line on at connected our we somehow know apologize. We

our way were your levels the are back at we the through as looking year. because about we talked are Adrienne, question, looking building XXXX at inventory inventory, XXXX, we trends versus to So, in internally, inventory

better the to So is comparison compared XXXX. for inventory

are sales XX%. up our So

Our inventory is XX%. up

slightly In have not would of product a little as balance as unit the do we I terms of prices, in bit the QX of much levels transit in versus associated receive the for to products well the heads brine that of as we the balance that say, year with necessarily is more to the yes, inventory, with elevated delayed. between expected in-transit

have a of reason, that's AUR elevated increase a we So bit it's between unit versus balance increases. inventory. the And little in-transit levels of

Adrienne Yih

much. helpful. very Very, Thank you very

Lauren Hobart

Thank you.

Navdeep Gupta

Thanks, Adrienne.

Operator

Thank you for and by. question your standing for

question from go next comes Our at Kate ahead. Sachs. Please McShane Goldman

line is Your open.

Kate McShane

during Hi. was Thanks of mentioned much ticket, taking some way away terms our for to there price I was to inflation Good in I how maybe average down ask Is versus how change ticket the was which out morning. items question. wanted that X%. the about much you in quarter? think about bigger from any parse mix

Navdeep Gupta

normalize, the as we it fitness increases, Kate, easiest equipment categories that does Yeah. balanced that the as a put out, haven't like ticket you expected related have in as the and AUR details that is way surge pressure Yes, the bit way given one. COVID on overall and outdoor is to a the size, the we – But a that and you little inflation seen. it's combination. on that about called think against of the

Kate McShane

it could in it in or apparel in weather, the to part know, categories markdowns and team if like have quarter. heard affected so, Were question you. related first sports quarter? just sales apparel I a have some Okay. whether adverse we've And lot there higher any merch you the my been be quarter. weather about that? follow-up auto margins And then and in sensitive the is, how Thank retail

Lauren Hobart

I weather colder main of had we expectations did wetter our that – the we spring didn't We Kate, markdown any met experienced significant a category from Lauren. – The of not key Yeah, said, an the that impact see normalizing. golf. certainly was drive any categories, in But it's behavior. as impact and

Kate McShane

Thank you.

Lauren Hobart

you. Thank

Operator

Thank you your for question.

Ohmes Bank comes at ahead. Our go next Robert from America. of question Please

Robert Ohmes

get Should maybe look then higher The then we still consumer also, Thanks. good expect said – doing is well sort merchandise be growth year-over-year to Thanks. well? for Lauren, through good, guidance thoughts a of And the to expenses the in the and I on into to assume midpoint the year? also, well on was what kind just more accelerate comps guidance. through as you going less implied So of is hoping expenses sort question them XQ. Does do of is same-store X% you've to be And accelerate to would XQ, the sequentially in to less of I clarification meaning? XQ through My move that, X% as you midpoint first we margins that really the merchandise follow-up to these consumer of highlighted expected, margins, look more being Navdeep. the the maybe we should also quarter. a And in is date to sales would than minus similar XQ? the coming planning year? for think,

Navdeep Gupta

question. Maybe was question. last the Robert, in-depth very So a I'll begin that with

an one, giving here. not we're guidance So inter-quarter

what not that the that customer in we of to for sentiment the and with not we the do change -- of has QX. trends anything business. in expectations trying imply more the is the seeing to out much It called terms are Lauren material a So

is of So XXXX One the you QX. versus look asked. and I'll Lauren finished sales. our implied where the The business is you our that QX, reaccelerated especially, QX expectations were midpoint big we Like on said, address we performance. what if three questions kind with at pleased in

that address in trajectory the coming kind we really wanted happening sales in pressure and is appropriately guidance has cautious the that general a May. expectation the the business the not being is not we top the of upfront. wanted takedown trends And of something in Lauren and we outlook that the about our categories like landscape. what core of in And QX. month been The our that called again, in is meaningful our out feel out of, kind seeing line of guidance. The overall business included like in purely to the of change on good we're So on consumer economic ignore the to about has in consumer the and

As called well have elevated. There we anticipated we the But that that expenses are other what freight the up. seeing -- be have out, is there gotten fuel will about last in think that two more three as will as as be we costs inflation, be wage we we remain are the elements since pronounced guidance. gave would these prices elevated to well as months we continue original the pressures. The go continuing to

back well as there in all we now well, as the not And our may athlete not So like thing propensity just to that cautious we we half costs called kind of about year. of we be that some It's anything. anticipating of we of and in our landscape input be what half we Lauren as the promotions acknowledge potential between out, of the be are to increase just may we the of business. decide those normalization And the might we a right, the trying to in are of the may seeing cost feel Again, out, -- the do athletes the long-term little been are called bit our pass of guidance. potentially, a seeing right wanted to piece, happening. seeing risks in that costs. overall as these economic higher year. the And the promotions anticipated, And a back and structure seeing again, from perspective we last incorporated

is that into third has our guidance. been contemplated that So the piece

Lauren Hobart

margin that to still maintain over even I Robby, going is Yes. which want to that the build merch forward new years. are in guidance, gains majority margin the our few going one just assumes, past our on forecast of we thing, the

Robert Ohmes

Thank so all. much. That Really is helpful. you

Operator

Perfect. Thank for your question. so much you

question comes Paul at Our ahead. go Citi. Please Lejuez from next

Paul Lejuez

talk Can And talk then categories and the label just strength, just performance saw performance your and how feel then share where label you in and any Thanks, Thanks. -- business? secondly, do could And quarter? specifically, about you about Hi. those your apparel and saw penetration within not footwear gaining inventories you is you there guys. places during inventory, where where you if are private about weakness private about specifically?

Lauren Hobart

opening would Yes. well an we the fact And line, well, vertical did is our wonderful in VRST that doing the is with incredibly really our DSG does fashion as extremely price CALIA I specifically our are point with point that, how Paul, line line. QX. brand pleased to new and provide and

So really, I performance pleased. the not across an And vertical gaining think area I and in an apparel to From not there's business. where standpoint really are the brands share footwear chase point footwear quarter, reasons in did could we we've if well would really, really for good. more. more, and inventory been about that again, talking we is And all chase the category that can

right apparel we season sure getting not markdown On around the that better. right late, in came we have the to believe stock. a But the are risk product should be anything so apparel side, us, making that and we that in just back-to-school did have some inventory product, quarter, challenges it's during buy we planning for the by

Paul Lejuez

Thank luck. you. Good

Lauren Hobart

you. Yes. Thank

Operator

you Thank your for question.

JPMorgan. go ahead. Please from at Horvers comes question next Christopher Our

Christopher Horvers

Thanks and morning. good

I input this at what So your point, follow-up characterize margin have have the margin to you you basically, could If cost least gross merchandise want said, on essentially maintained I rate. point. at just pressures passed you through and

where causes your you're input saying it cost merchandise forward, some there degradation in be Going absorption, margin. could

quarter. you you talk follow-up on about margins what fourth to look the is in my versus Can what decelerate that basis you that? XXXX, merchandise a did relative sort if drove stack experienced of So

Lauren Hobart

-- want and to to start over I'll off question. Navdeep it want clarify I to one pass to I thing. be answer last your

lines, hard on cost consumers, been in specifically pressures. We have lines, through we soft to input have in not cost passed some our of input all pressures little a bit passing but

fact benefiting we're the some been improved that not have our from and our mix promotional. We of assortment,

the not So reflecting margins they're reflecting though forward. the of -- our strong, it's that so not are fact even merch the cost passed XXX% we've

increases to of accelerated our to at bear we're And on. higher increase may as really we we data-driven level point, be have will pricing continue cost optimized what rate, absorb. to the in future, start versus the terms margin the at down specific if Now consumer will to an going that costs look at passing what

so to And the question. clarify part then answer latter if want just of I you that. Navdeep, And the can

Navdeep Gupta

two compare think fourth Like -- I called it to promotional. last if you were that XXXX think had of ways quarter are year, we Chris, in it. out about Yes. versus not we there

you and is, in promotional expectation. included fourth when So how was benefit -- quarter QX typically our considering that

year, not as that anticipate the with to guidance We margin been compared when pleased especially years for the levels. goes to very merchandise well. we to out, be have do has years. the But our contemplated be the as margin Like is merchandise used of to that pre-COVID expect landscape expansion, the vast seen majority are Lauren last that into and been not few that you benign We it will a XXXX. remain promotional two the look this that it landscape over where in called also performance the seen to gains our expectation able last as from at has we maintain have back we promotional it

out. we somewhere watch landing it's piece the So to will two, the it's to be that and going that's between somewhere, continue

Christopher Horvers

Okay.

So so I that -- just just understand.

a lack you have, effect? benefit, really where in the of, season was the it extra sort fourth that just normal that promotion in holiday didn't then an So quarter quarter, in first year-to-year caused the of

Navdeep Gupta

merchandise pleased a able the of of not of margin, expect, are kind merchandise that margin were still the to we as compared quarter. look expansion to is QX our typically versus you very to holding. And are even we with when compared as that's And trajectory quarter promotional you we XXXX. -- right, QX XXXX fourth Exactly. at when expand

Christopher Horvers

that XXX quick Got diesel, it. up And is then of, XX% all prepared the really was of follow-up -- remarks, Obviously, bps mid-quarter your mid-quarter. -- my to sort higher, in ripped year-over-year freight? points the diesel

impact? basis? that you that is a And how of go-forward on modeling are thinking about sort So all that

Navdeep Gupta

called of correct, by are you we that would the a the majority, pieces, there say as are when comp, -- have the you say, was negative when saw. the no it. and questions I that like vast would I Yes. deleverage what X.X% There freight is also driven expenses get fixed fuel two think is the you we one about included. that out well pressures as But is biggest

Christopher Horvers

Got it. Thank you so much.

Navdeep Gupta

was in we you to decline, wage pressure sorry, that called -- at was rate of freight us. this as the there look the a saw internal as we normalization, in now what to well more that our right not When a expectation, more are the some was not thought that Lauren in line year-over-year, back be add with these expenses, both surprise Maybe will it we which pressure half. out, expecting this in like QX the I'll we -- was

Christopher Horvers

Got it. Thank you.

Operator

so Thank much. Perfect. you

ISI. at Cheng Our question Warren ahead. from go comes Please Evercore next

Warren Cheng

the I guys. morning, of Good the merchandise that rate margin expansion majority to Hi. just is confidence wanted about your ask sustainable.

So you've some you've developed surgically tools, about of pricing. talked these to adjust

to pandemic you're concepts. some pockets clear years? winter couple as happened So where developed been situations are new can Have an of of clearance or actually how getting so, it just you had the of normalize, in concepts on these that categories environment? the tested -- because And of XQ, there these realizations some the really clearance talk changing as tools about in hasn't last and excess you inventory some You've inventories? tools if were much the in these inventory inventories

Lauren Hobart

Warren. Yes. Thanks,

have as healthy, we good going are We said categories that substantial in of didn't normalized I buy inventory. around clearance amount a of referencing you're before, those have we some because to --

-- it's personalized it have having we new that's of for stock at sort a to not our time. can surgical. sort targeted levels of we down. Gone!, out of don't our And more we bring And online can and easier to marking specifically away and partly fresh fact higher store-wide the long, like much or tools clearance are clearance, product because we Going, really we prices lot safety any things very started We've sit of in of Going, be long really, said, let consolidated once we've concept, offer but the and improved. digital issues because offers. can so site-wide success also it where get offers from without the marketing So moved doesn't either healthy with we That are offers it a we Going, that that having can then Gone! in category-led DICK'S our products Going, clearance both store there,

really our So strong. are generally tools speaking,

Navdeep Gupta

to Yes. said. what color Back to hold to majority the Warren, of I'll add Lauren which question, one we of can vast more your initial the part the confidence is the gain. that on

penetration Hunt's XXX and as our gone has changed. points brands rate XXX XXXX, significantly has margin well The approach vertical vertical brand to back marketing has as just gone basis to penetration up significantly to remind, think significantly to down. higher you If

those the kind have are capabilities So, years doing tremendous structural that have And that capabilities no last developed longer are price built. all we that back optimization confidence in over of do used we three us to promotions give big in XXXX. to we addition the we

Warren Cheng

are follow-up my trade or national brands behavior from any take seeing Just very on you first quarter? seeing you down in? the those of private observed down, share that brands Are any you evidence the That's is, might doing thoughts coming either Thanks. helpful. And new brands just in trade are really have customers well? private

Lauren Hobart

we I the I same think important that like don't our I view success for positive, have But fact actually watching down. that I though, as price to product the customer accelerated. and think it's are point, trade trade our I increased, thing time that actually assortment it's accurate just now. At right that high still -- brand, premium from right categories that having the in of the much a at an think we've them spending been DSG with and – lives I heat. group and think, Yes. are we're that penetration fact Gold sales on been that that our say think don't is the has notable which it's some be down. ways, people in evidence, that would to and wouldn't opening this has things become people's have time attractive more so

a So, it's bifurcated answer. of kind

Warren Cheng

Got good it. and luck. Great. Thank you

Lauren Hobart

Thank you.

Operator

question. Thank you your for much very

comes Our Sam from Trading. next Williams of question Poser

Sam Poser

thank gross and margin two. sort SG&A. mean, for Good taking in the prior morning is the question. I One my you on have you overall real of gave gave, I guidance you direction on

XXX You end bps. bps, XXX 'XX. said 'XX versus above the I margin up around by would would that gross SG&A likely lever And think

could So, numbers for those us? you update

Navdeep Gupta

Yes, Sam.

I have -- think our guidance think today. given we I an appropriate level of

modeling won't drivers, the details. to are And I are just go would into three about the take especially as guidance, talk And say we to if that came big when reiterate, there so, maybe offline. But can updated questions, profitability. we that I there it

foremost for top the The first the and range. is expectations currently line updated

of pressure, then an gross store chain and and that's wage just predominantly on So which been line And it, profit in -- pressures, is pressures contemplated. kind if which about labor sit line. our sits think you primarily supply the The in between will freight SG&A – which be that our line.

that's as are in are there some well, kind taken have we offsetting of So are that the we other as revised Potentially, seeing the other being that lines. guidance inflationary contemplated. part pressures but actions pressure of

Sam Poser

happen. craziness sort job that a the you your -- consumers what little you coming and of own being face of What -- the during overcome crisis, then the these the I game on. question going that are a of is overcome adjust you what And you your This guidance? other sort internally I you. did Thank would macro of guess pressures sort different lot a -- doing bit understand adjusting what about to able But caused guys we're to to macro are I you're are that's prudent could better of to to the your good is, raise have way.

Lauren Hobart

job a we when a One business, but I few have outside somewhat our people Sam, about a overstatement, things maybe of an get natural that incredible team will with business. their hedge is still stop agree Yeah, did within we with case, our And playing managing I found in an team they you, sports -- that, that that to our such think through wanted crisis. families.

you And businesses similarly, normalize. people so those to go we see onto field, started then the And businesses other when increase. back saw

that So a lane in in generally of speaking, carry. we we're products I the think great terms

prudent. We are being

an consumer the -- it's just challenging single right we is getting more going awful through And every forward, Looking now. lot day. frankly,

And the we really and we like costs and work to given to But expect is challenged to sales want we you every will cautious, accelerating that. state in right now. appropriately consumer to manage us lever how rapidly that do drive be that have so can pull are a expenses, some and heck to very

Sam Poser

much. very you Thank

Lauren Hobart

Thank you.

Operator

Thank question. your Perfect. you for

ahead. Our comes D.A. go next Baker from question Davidson. at Please Michael

Michael Baker

seeing you're X% being guidance, say you what X%. of the range seeing on that on based you you're or running is, Thanks. change X% that think the what -- guidance Is taking interpretation cautious it are previous again, any down down your to yet. down could you presume you're part just some within of That Hey. the consumer in the the comp, on question X%, anticipate happen. one, right might second down think because still that new are guidance top it not Two to fair some still But it's I I was -- your does questions, you line? that it in the down the to I change, not of but environment, guess change it, you're in saying -- because just of assuming

Lauren Hobart

That really, and positive expect to about. think -- everything on that you guidance. can within said still things we we operating there's, comp exactly new the is a our But can't going Michael, expecting it of And feel anticipates lot our that forward. control perfectly. we I we we our really that is guidance -- are guidance range control, absolutely side old are

Michael Baker

sense. makes other business. specifically about Okay. I the Yeah. could golf ask That question, One if

we Thanks. weather there bit impact, the about have a business expect thinking better, little anticipated was what's think that outlook If business Just And said that a you there guess year? for as was I golf wasn't had now but point that. strong. the curious, weather quickly business maybe seems gotten that the I weather better? one in that, how do to you at that your related, for you're get that to category.

Lauren Hobart

played game long-term. buying we really, that in dropped really category the come a who is growth not has think have are tremendous Golf and still are new Yeah. new consumers have the The strong. Rounds products. into

don't maybe you have weather in shifts because year either business. that December slowing expected be we snowing April, I long-term, to at every think normalization, some don't or the golf So in know. going confidence of bother which there's we But all, lot I the happens in on a

Michael Baker

club offering, the Makes offer. advantage sense. And Appreciate tremendous Thank Golf it. Galaxy fitting, your I'll of I just you. say that, took

Lauren Hobart

that. We you. you. Thank appreciate Wonderful. Thank Michael,

Operator

Thank you for your question.

ahead. Our Kernan next question comes at from go Please John Cowen.

John Kernan

Hey, everybody. for morning, question. taking my Thanks good

some in we're what Softlines is, a brands vendors, an their footwear in and of to into as meaningful the what acceleration of buying trend plans and from the that businesses the athletic for So get a talk acceleration North into the vendors, cases, we apparel hearing opportunity you're get back in market? the How as there's we seeing lot back that from you're to Can half year. half? you that American

Lauren Hobart

the supply think mentioned the to year to fact do guided start on. I going bullish of we challenges off some see we in is the John, as that we're year. more the the and sequentially back-to-school in particular, on we side, and Softlines we in have accelerate the chain as rest remarks year apparel at goes originally – my that look that had

the and absolutely consumer product So these into trends. is and there I are good, buying is we think the

John Kernan

and we guidance, the on the ahead. what's you And and maybe Go from margin just low to biggest more both Got from do EPS, a end the – – then macro to look and then standpoint? where high the factor in the gets low scenario is to towards end of the sales on down at the look the end? it. $X.XX And $XX.XX X% you what high end the if we're What down a swing think standpoint? X% the guidance,

Navdeep Gupta

how – – to the that, consumer well, increasing, would the if good that see sales. we to The indication say of John, a continues the by well, if impact is I continue hold overriding gas is to be we prices, will consumer do. of cumulative the impacted prices holding our me, and up would not business biggest commodity inflation, and is getting are factor not comp

that factor we The so looking yes, elevated. have are is already been continue to know cost, those And incorporated. that into. to the me, remain Those will we biggest

And biggest is factor the expectations. so line the top to be going

John Kernan

back from you maybe just When follow-up growth one balance where the gives going and is to at retailers, this a are growth the And Got line there. into quick vendors the we're at the not of to what then that look the half – confidence simplistically look industry, such And inventory be a you inventory point? the clearly sheet trending this on right over-inventoried year dollar perspective, above much on we at top now? goes it. versus basis pretty trends across sales

Lauren Hobart

Go Navdeep. ahead,

Navdeep Gupta

Yeah.

we that doing are are our the in lot, about what all team I on we this and different the very good two business, the are potential, think overall the where very that perfected scenarios, have and They the probably supply last team. is evaluations our are confidence on And position. expect, to team upside, a we the of me, these that internal this at you could chain art impacted merchandising as of and out the of thinking is where and the discussing the about we scenarios. that years Yeah. the the careful business beginning on have inventory me, from pulse the different our have we confidence we indicator very, on come called – confidence be categories – as where about to on a biggest have

John Kernan

it. Got

Lauren Hobart

And think not with manage toxicity, any plan the level – we where inventory create we are right fact now, and through we buy that -- are We the we toxic. is to wherever don't can have. inventory of any and around an risk I

concern not us. does this So

John Kernan

Understood. Thank you.

Operator

Thank you.

Joe Feldman from ahead. at Please Our LLC. next question go comes Group Advisory Telsey

Your is open. line

Joe Feldman

the mentioned lot, want to bit. to there that. incremental Great. you I that the or are quite I occupancy margin actually costs of the seeing drove up, gross real curious -- just margin Was we've estate back on merch going was as Thanks. what to related Hi, guys. or a line, know you was I about to And it good a things? talked deleveraged actually go sales, rents side simply pressure but just morning

Navdeep Gupta

No, by Joe, it's all driven sales.

that sales flexibility in So the answer X.X% more our have the comp to balance driven decline, we it's feel the a estate all To in opportunity efficiencies able the question, good in by we terms minus to costs. have your actually real decline. have and and -- be occupancy we our really financial and drive strong sales sheet, that that at and of strength performance being X.X% our portfolio we about

Joe Feldman

of not hear. at picture now operating to thought pre-COVID But all months And it was it. operating think XX-ish. it's we're about was, of XX.X%. back the Got or probably that? if the going probably mean, I EBIT to last -- like year, profit how thinking to kind think to think margin, think agree, and we will. level we right levels. XX-ish, bigger all you going peak going we That's forward it's three to going as all should It's I be of also ago, be not more or a you what's then start had question we about as great margin, I

just difficulty] [Technical the of us kind can if of kind So to about help you I'm curious, that future? give think any around Thanks.

Operator

everybody. [Operator lost you, the speakers. we Unfortunately, difficulty] everybody. connection [Technical Thank with Hello, Instructions]

with the connection the again. speakers have We Q&A. the continue Please

Navdeep Gupta

from of part XXXX. to my is Basically, there's that that don't rephrase I going Navdeep. conditions. what we back got of in at nothing macroeconomic hold we where saw kind is play I'll -- is this sentence. What achieving that that to the the we off. the saying levels is us Joe, thing are probably structurally, believe know Hey, we dropped last profitability the try is

to. that is profitable. we So continues structurally, the continue very e-commerce look it's will that's really merchandising strong, business and And to margin our really to be me, our to piece strong,

the optimistic So are you our structurally, profitability about of very long-term when we think about the sales it, and business.

Joe Feldman

hear. this That's great you quarter. to guys. Thank luck Good

Lauren Hobart

you. Thank

Operator

to session. CEO Hobart, Lauren for final any for pass over to now like Joe would remarks. question. and concludes your back Q&A you President Thank our This I

Lauren Hobart

to for you hear confidence your you, We we technical the DICK'S all Sporting and glitches of have hopefully, seeing in some We Thank Thank Goods. interest you. apologize on to this you forward look business. able quarter. next call, in were that the for our thank but you

Operator

you, Thank joining everybody for call. today's

now You disconnect. may

DICK'S Sporting Goods (DKS) 25 May 222022 Q1 Earnings call transcript